KATHMANDU, Dec 27, 2012
The six-month dispute between Lotus Investment Finance and Civil Capital Market over underwriting of shares that remained unsubscribed in an initial public offering (IPO) is likely to come to an end soon, as a group of investors has stepped forward proposing to purchase all the shares that were not subscribed by the public.
This proposal has now moved the ball on ending the conflict to the court of the Securities Board of Nepal (Sebon), which now needs to extend approval for the 68.69-million-rupee deal to take place.
“We (Lotus and Civil) have jointly filed an application at the Sebon requesting that the investors be allowed to purchase the unsubscribed shares,” Samaj Shrestha, CEO of Lotus Investment Finance, told Republica, without revealing identity of investors. Sebon has also acknowledged receipt of the letter.
“We will look into legal matters and come up with a decision soon,” Sebon Spokesperson Niraj Giri said.
If the deal materializes, the conflict between Lotus and Civil will come to an end once and for all.
This dispute between the two erupted after the IPO launched by Lotus on June 10 failed terribly, with the finance company raising Rs 11.31 million of the targeted Rs 80 million.
Based on the agreement signed by Lotus and Civil prior to the launch of IPO, Civil had agreed to purchase 50 percent of the shares worth Rs 40 million in case the IPO remained undersubscribed. But when the need arose, Civil denied to take the liability. Instead, it wrote a letter to Sebon, requesting that it be allowed to return Rs 11.31 million raised from the primary market to the public so that a fresh IPO can be launched again.
Civil Capital argues it was forced to take the step after promoters of the finance company denied forking out Rs 28.69 million that would have fallen short even if the company made its contribution.
The argument was based on the logic that promoters should also take the responsibility for the failure of the IPO and chip in the deficit amount. This simply meant the 80-million-rupee IPO would have been fully subscribed if Rs 28.69 million was raised in time, as the public had already contributed Rs 11.31 million and Civil had pledged to purchase Rs 40 million worth of shares.
Lotus, on the other hand, argues its promoters had never denied to inject their part of money. “They only said they could not arrange the funds immediately and would make their part of contribution by mid-July 2013 when the company has to meet the regulatory capital requirement of Rs 200 million. They even changed the date to mid-April 2013 after pressure began building on them,” Shrestha said.
At that time, Sebon had sided with Lotus and called arguments of Civil Capital “baseless”. It even said “allotted shares should have been purchased by Civil without making a fuss”, but failed to issue clear instructions as the existing law remains silent on the issue.
Although the latest proposal of investors may have come as disguised blessing for the undecided securities market regulator, possibilities of such rescuers coming to aid cannot be assured if similar episode repeats.
“For this we need to make some arrangements so that such disputes do not arise,” Giri said.
Source: Republica
The six-month dispute between Lotus Investment Finance and Civil Capital Market over underwriting of shares that remained unsubscribed in an initial public offering (IPO) is likely to come to an end soon, as a group of investors has stepped forward proposing to purchase all the shares that were not subscribed by the public.
This proposal has now moved the ball on ending the conflict to the court of the Securities Board of Nepal (Sebon), which now needs to extend approval for the 68.69-million-rupee deal to take place.
“We (Lotus and Civil) have jointly filed an application at the Sebon requesting that the investors be allowed to purchase the unsubscribed shares,” Samaj Shrestha, CEO of Lotus Investment Finance, told Republica, without revealing identity of investors. Sebon has also acknowledged receipt of the letter.
“We will look into legal matters and come up with a decision soon,” Sebon Spokesperson Niraj Giri said.
If the deal materializes, the conflict between Lotus and Civil will come to an end once and for all.
This dispute between the two erupted after the IPO launched by Lotus on June 10 failed terribly, with the finance company raising Rs 11.31 million of the targeted Rs 80 million.
Based on the agreement signed by Lotus and Civil prior to the launch of IPO, Civil had agreed to purchase 50 percent of the shares worth Rs 40 million in case the IPO remained undersubscribed. But when the need arose, Civil denied to take the liability. Instead, it wrote a letter to Sebon, requesting that it be allowed to return Rs 11.31 million raised from the primary market to the public so that a fresh IPO can be launched again.
Civil Capital argues it was forced to take the step after promoters of the finance company denied forking out Rs 28.69 million that would have fallen short even if the company made its contribution.
The argument was based on the logic that promoters should also take the responsibility for the failure of the IPO and chip in the deficit amount. This simply meant the 80-million-rupee IPO would have been fully subscribed if Rs 28.69 million was raised in time, as the public had already contributed Rs 11.31 million and Civil had pledged to purchase Rs 40 million worth of shares.
Lotus, on the other hand, argues its promoters had never denied to inject their part of money. “They only said they could not arrange the funds immediately and would make their part of contribution by mid-July 2013 when the company has to meet the regulatory capital requirement of Rs 200 million. They even changed the date to mid-April 2013 after pressure began building on them,” Shrestha said.
At that time, Sebon had sided with Lotus and called arguments of Civil Capital “baseless”. It even said “allotted shares should have been purchased by Civil without making a fuss”, but failed to issue clear instructions as the existing law remains silent on the issue.
Although the latest proposal of investors may have come as disguised blessing for the undecided securities market regulator, possibilities of such rescuers coming to aid cannot be assured if similar episode repeats.
“For this we need to make some arrangements so that such disputes do not arise,” Giri said.
Source: Republica
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